Ventex Trade Pvt. Ltd., Kolkata V. ITO, Ward - 5(4), Kolkata

ITA 1440/KOL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9361 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 21-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 20-08-2009
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Assessee Lawyers: V N DATTA
• Keywords: Business income; Source of fund; Speculation loss
• Section: 2

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO . 1440/KOL/2009 &' ()/ ASSESSMENT YEAR : 2005-06 (+, / APPELLANT ) M/S.VENTEX TRADE (P) LTD. (PAN: AAACV 8556 H) - & - - VERSUS - . (./+,/ RESPONDENT ) THE I.T.O., WARD-5(4)/ KOLKATA +, 0 1 #/ FOR THE APPELLANT: SHRI V.N.DATTA ./+, 0 1 #/ FOR THE RESPONDENT: SHRI PIYUSH KOLHE #2 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 25.03.2009 OF THE CIT(A)-V, KOLKATA PERTAINING TO A.YR. 2005-06. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS RELATIN G TO CONFIRMING THE ACTION OF ITO TO TREAT THE BUSINESS LOSS AMOUNTING TO RS.4,15,859 /- AS SPECULATION LOSS. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT THE AO ADDED AN AMOUNT OF RS.4,15,859/- ON ACCOUNT OF LOSS IN SHARE TRADING BY HOLDING AS DEEMED SPECULATION LOSS IN EXPLANATION 2 TO SECTION 73 BY OBSERVING AS UNDER :- ASSESSEES RETURN DID NOT INCLUDE COMPUTATION OF I NCOME. THE NET PROFIT AS PER P&L A/C FORMING PART OF THE BALANCE SHEET FILED ALONG WITH THE RETURN, WAS DISCLOSED AS INCOME FROM BUSINESS AND PROFESSION BY THE ASSESSEE IN ITS RETURN. FROM THE FIGURES AVAILABLE IN THE BALANCE SHEET AN D P&L A/C, IT APPEARS THAT ASSESSEES CLOSING STOCK OF SHARES WAS RS.10,18,02, 480/-, WHEREAS LOANS AND 2 ADVANCES WERE OF RS.69,33,439/- (REVISED) AND ITS F UND AVAILABLE WAS RS.10,61,68,957/- WHICH COMPRISED OF PAID UP SHARE CAPITAL OF RS.1,28,66,900/- AND SHARE PREMIUM OF RS.8,84,70,00 0/- MAINLY AND THE COMPONENTS OF ITS INCOME ARE INTEREST INCOME OF RS. 3,98,409/-, INTEREST ON I.T.REFUND OF RS.2,605/-, SHARE OF PROFIT OF RS.81, 160/- AND LOSS IN SHARE TRADING OF RS.3,78,480/-. IN COURSE OF HEARING, EXP LANATION WAS CALLED FOR AS TO WHY THIS LOSS SHALL NOT BE HELD AS DEEMED SPECULATI ON LOSS AS PER PROVISIONS OF EXPLANATION TO SEC. 73. IN REPLY, BY A WRITTEN S UBMISSION, IT WAS CONTENDED THAT THE ASSESSEE WAS REGISTERED AS N.B.F.C. UNDER R.B.I. NORMS AND ITS INCOME FROM INTEREST ON LOAN WAS MORE THAN ITS SHARE TRADI NG LOSS. THE ASSESSEE WITH THIS WRITTEN SUBMISSION, FILED A COMPUTATION OF INC OME AT HEARING STAGE. THE ABOVE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED BECAUSE FROM THE RATIO OF FUND DEPLOYMENT, AS AVAILABLE IN THE BALANCE SHEET, IT APPEARS THAT OUT OF THE TOTAL FUND DEPLOYED OF RS.11,33,71,919/-, RS.1,18,0 2,480/- STANDS AS STOCK-IN- TRADE, WHEREAS RS.70 LACS (APPROX.) STANDS AS LOANS AND ADVANCES DEPLOYED AS ON 31.3.05, WHICH SHOWS ASSESSEES PRINCIPAL BUSINE SS IS NOT THAT OF BANKING OR GRANTING AND ADVANCING OF LOANS, THOUGH ONE OF ITS BUSINESS IS GRANTING LOANS AND ADVANCES, WHERE THE DISCLOSED INTEREST INCOME A RE EARNED. SO, EXAMINATION OF INCOME CRITERIA IS NOT CALLED FOR IN ASSESSEES CASE HERE BECAUSE THE ASSESSEE HAD BUSINESS INCOME UNDER THE HEAD. INTEREST, SHARE PROFITS AND SPECULATION LOSS SUFFERED IN SHARE TRADING, WITH MEAGER INCOME OF RS.2,605/- FROM INTEREST ON I.T.REFUND. IN VIEW OF THE ABOVE, ASSESSEES CON TENTION THAT ITS SHARE TRADING LOSS IS LESSER IN QUANTUM THAN ITS INCOME FROM OTHE R SOURCES DOES NOT STAND. THEREFORE, THE LOSS SUFFERED IN TRADING IN SHARES A LONG WITH EXPENSES ATTRIBUTABLE TO SUCH TRADING LOSS, AS COMPUTED BELO W, BEING RS.4,15,859/- (RS.3,78,480 + RS.37,379) IS TREATED AS DEEMED SPEC ULATION LOSS AND THE ASSESSEE IS NOT ALLOWED TO SET OFF THIS LOSS FROM O THER INCOME. HOWEVER, ASSESSEE CAN CARRY FORWARD THIS LOSS FOR SETTING OF F OF THE SAME FROM ITS INCOME UNDER IDENTICAL HEAD, IF ANY, IN FUTURE YEARS AS PE R LAW. 3.1. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER :- 11. I DO NOT AGREE WITH THE ABOVE CONTENTION OF THE APPELLANT COMPANY BECAUSE THE CAPITAL EMPLOYED IN SHARE TRADING BUSIN ESS IS MUCH MORE THAN THE CAPITAL EMPLOYED IN GRANTING LOANS AND ADVANCES AS HAS BEEN CLEARLY BROUGHT OUT IN THE ASSESSMENT ORDER. I, THEREFORE, HOLD THA T FOLLOWING EASTERN AVIATION & INDUSTRIES LTD. VS CIT [1994] 208 ITR 1023 (CAL), THE APPELLANT WOULD NOT BE ENTITLED TO GET BENEFIT OF EITHER OF THE TWO EXC EPTIONS AS PROVIDED IN THE EXPLANATION BELOW SECTION 73. THUS THE ADDITION MAD E ON THIS ACCOUNT IS CONFIRMED AND APPELLANT IS NOT ENTITLED TO GET ANY RELIEF ON THIS COUNT. 3.2. AGGRIEVED BY THIS THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3 4. AT THE TIME OF HEARING, THE LD. COUNSEL APPEARING O N BEHALF OF THE ASSESSEE BY REFERRING TO THE COMPUTATION OF INCOME FILED BY THE ASSESSEE BEFORE THE AO DURING THE COURSE OF HEARING AND COMPARED TO STATEMENT OF FUND S DEPLOYED AND XEROX COPIES OF THE P&L A/CS AND BALANCE SHEET WHICH WERE PLACED AT PAGES 15 TO 18 OF THE PAPER BOOK AND THE MAIN OBJECTIVES OF THE COMPANY CONTEN DED THAT THE ASSESSEE COMPANY IS A NON-BANKING FINANCIAL INSTITUTION DULY REGISTERED WITH R.B.I. U/S 45IA OF THE R.B.I. ACT 1934 AND AS PER THE OBJECTIVE CLAUSE OF THE ASS ESSEE COMPANY. THE ACTIVITY OF THE ASSESSEE IS GIVING LOANS AND ADVANCES AND ON ACCOUN T OF SHARE TRADING DURING THE PREVIOUS YEAR RELEVANT TO THE A.YR INVOLVED. THE AS SESSEE COMPANY INCURRED LOSS OF RS.3,39,289/- WHEREAS THE INTEREST INCOME IS RS.3,4 4,337/-. THE ASSESSEE FALLS UNDER EXPLANATION CLAUSE-1 ATTACHED TO EXPLANATION TO SEC TION 73. THEREFORE, THE ACTION OF THE REVENUE IS NOT JUSTIFIABLE. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL CONSIDERATION OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT THE ASSESS EE COMPANY INCURRED LOSS IN SHARE DEALING ACCOUNT AND IT IS NOT A COMPANY WHOSE MAIN SOURCES OF INCOME IS FROM INTEREST ON SECURITIES OR FROM INCOME FROM HOUSE PROPERTY OR CAPITAL GAINS OR INCOME FROM OTHER SOURCES. IT IS FURTHER OBSERVED THAT INTEREST INCOME ON LOANS AND ADVANCES IS TO BE TREATED AS BUSINESS INCOME AS AGA INST THE CONTENTION OF THE ASSESSEE THAT IT FALLS UNDER THE HEAD INCOME FROM OTHER SOUR CES. THEREFORE, WE FIND NO INFIRMITY IN THE ORDERS OF THE REVENUE AUTHORITIES TO BE INTE RFERED WITH. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 04.02.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 04.02.2011. R.G.(.P.S.) 4 #2 0 .8 9#8(:- COPY OF THE ORDER FORWARDED TO: 1. M/S.VENTEX TRADE PVT. LTD., 1,R.N.MUKHERJEE ROAD, 5 TH FLOOR, ROOM NO.45B, KOLKATA-700001. 2 THE I.T.O., WARD-5(4), KOLKATA 3. THE CIT, 4. THE CIT(A)-V, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /8 ./ TRUE COPY, #2&;/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES